TY - JOUR
AU - Feenstra,Robert C.
AU - Gagnon,Joseph E.
AU - Knetter,Michael M.
TI - Market Share and Exchange Rate Pass-Through in World Automobile Trade
JF - National Bureau of Economic Research Working Paper Series
VL - No. 4399
PY - 1993
Y2 - July 1993
DO - 10.3386/w4399
UR - http://www.nber.org/papers/w4399
L1 - http://www.nber.org/papers/w4399.pdf
N1 - Author contact info:
Robert C. Feenstra
Department of Economics
University of California, Davis
One Shields Avenue
Davis, CA 95616
Tel: 530/752-7022
Fax: 530/752-9382
E-Mail: rcfeenstra@ucdavis.edu
Joseph Gagnon
Peterson Institute for International Economics
E-Mail: JGagnon@PIIE.COM
Michael M. Knetter
President and CEO
University of Wisconsin Foundation
1848 University Avenue
Madison, WI 53726
Tel: 608/262-1758
Fax: NA
E-Mail: mike.knetter@supportuw.org
AB - This paper explores the relationship between exchange rate pass-through and market share for monopolistically competitive exporters. Under fairly general assumptions we show that pass-through should be high for exporters based in a country with a very large share of total destination market sales. For source countries with small and intermediate market shares, the theoretical relationship is potentially nonlinear and sensitive to assumptions about the nature of consumer demand and firm interactions. The model is estimated using a panel data set of automobile exports from France, Germany, Sweden, and the United States to a variety of destinations over the period 1970-1988. The empirical relationship between pass-through and market share is significantly non-linear: pass-through is the lowest when the source country's market share is around 45 percent and it is highest when the source country's share approaches 100 percent.
ER -